By Ezgi Erkoyun
ISTANBUL (Reuters) – Turkey’s economy expanded 7.5% annually in the second quarter of the year, a Reuters poll showed on Wednesday, while the full-year growth forecast stood at 4%, pointing a drop in economic activity in the second half of the year reflecting weaker demand conditions.
The economy expanded 7.3% year-on-year in the first quarter, driven by strong performances strong exports and robust domestic demand. It is expected to have kept up the strong performance in the second quarter.
President Tayyip Erdogan’s new economic programme has prioritised growth and exports, while aiming to tackle inflation by shoring up Turkey’s chronic current account deficit instead of rate hikes.
An easing cycle under Erdogan’s programme led the lira to end last year down 44% against the dollar and shed another 27% so far this year, sending inflation to a 24-year high of nearly 80% in July.
While the rate cuts aimed at stimulating the economy, analysts predict that activity could cool in the second half of the year due to a downward trend in demand and an expected economic slowdown in Turkey’s largest trade partners.
The median estimate of 13 economists in a Reuters poll for annual gross domestic product (GDP) growth in the second quarter stood at 7.5%, within a range of 5% and 8.7%.
The full-year growth was lower, with the median estimate of 18 economists standing at 4.05% and forecasts ranging between 3.3% and 5%.
Turkey’s central bank cited signs of a slowdown in the third quarter last week when it shocked markets by cutting its policy rate by 100 basis points to 13%.
“It is important that financial conditions remain supportive to preserve the growth momentum in industrial production and the positive trend in employment,” the bank said.
Finance Minister Nureddin Nebati said on Tuesday that he expects growth in the second quarter to come in higher than the 7.3% recorded in the first quarter.
Turkey’s economy was one of few to narrowly expand in 2020, thanks largely to cheap loans. It bounced back in 2021, expanding 11%.
The Turkish Statistical Institute is expected to announce second quarter growth results at 0700 GMT on Aug. 31.
(Additional reporting by Milounee Purohit and Anisha Sircar; Writing by Ali Kucukgocmen)